Data: How Advisors Are Changing Compensation
April 6, 2015 4:40 PM
Data: How Advisors Are Changing Compensation
When it comes to pricing, charging clients a percent of assets under management -- often around 1% -- remains the heavyweight champion of the independent financial advisory world. Yet the venerable model faces challenges from a variety of contenders, including variations on flat fees, hourly billing and charging on a percentage of other financial metrics.
Financial Planning surveyed its readers to ask about compensation trends, their current structure and any changes they were making. We found some of the answers surprising. Page through to see the results, or click here to read our feature on the shifting compensation model. -- Charles Paikert & editorial staff
Image: iStock
Financial Planning surveyed its readers to ask about compensation trends, their current structure and any changes they were making. We found some of the answers surprising. Page through to see the results, or click here to read our feature on the shifting compensation model. -- Charles Paikert & editorial staff
Image: iStock
Where Does Your Compensation Come From?
Nearly 59% of the independent financial advisors surveyed by Financial Planning charged on a percentage of AUM. That share rose to three-quarters among fee-only RIAs -- although another 13% charged fixed fees and 6.5% charged by the hour.
Did You Change Your Fee Structure in the Last 12 Months?
Roughly 20% of all independent firms (and about a quarter of fee-only advisory firms) surveyed by Financial Planning in February said they had changed their fee structure in the past year.
In the Next 12 Months, How Likely Are You to Change Your Fee Structure?
About 13% of all independent firms (and roughly the same proportion of fee-only advisory firms) said they were either very likely or somewhat likely to alter their fees this year.
Why Did You Change Your Fee Structure?
Don't blame the robo competition. When the advisors who'd made a change in the past year were asked to explain their reasons, almost a third said they had made the change to increase profitability; 25% cited changes in operating costs; and almost 21% pointed to competition from other advisors. Less than 15%, by contrast, cited "competition from online advisory platforms" as a factor. (Advisors could choose multiple answers.)
Do You Charge Clients a Minimum Fee?
"If you don't make any other changes to your pricing structure," FA Insight's Eliza De Pardo urged attendees at TDAI's national conference, implementing a minimum fee "is the one to make."
